Payment Solutions Stand By to Assist Informal Economy
Informal economy and payment solutions are on the cards – literally. In an environment rife with risky cash transactions, a new light dawns. Far from the perception of the odd street vendor on the roadsides of dusty townships, informal settlements bristle with an unacknowledged and largely unmeasurable, but steadily growing business economy. The introduction of SASSA pension cards has paved the way for card-based payments but that is just the tip of the potential iceberg.
In his extraordinary book, KasiNomic Revolution: The Rise of African Informal Economies, SA author GG Alcock, a white person raised by activist parents in a KZN township, champions the informal economy sector. (Kasi, is the vernacular for ‘township’.) Alcock published his book to bring the reality of the informal economy to light. Alcock’s insider intel exposes the economic revolution he has seen develop in the backwaters of South African informal settlements and townships. His exploration validates the informal economy’s payment solution prognosis.
Informal Economy’s Vast Empire Requires Urgent Payment Solutions
Alcock points not just to businesses operating in the townships, but also incorporates rural marketplaces, taxi ranks and sidewalk stalls in the shadow of city skyscrapers. We are talking about Africa’s next great frontier. Alcock is uniquely placed to reveal the true stories of Kasi businesses, which don’t just survive as we may imagine but actually thrive and excel. KasiNomics tells us about the reality of the revolutionary entrepreneurship, which is largely invisible to us in the formal sector.
Is the informal economy payment solution ready? You bet!
In his state of address back in 2014, Gauteng Premier David Makhura said that the provincial administration started by spending R600-million buying goods and services from township businesses and that this has increased to more than R22-billion in the last five years.
Sceptics agree that it is a shot in the dark for an economy, which by its very nature is unaudited. Still, those on ground zero, like Alcock, know there is huge potential for economic growth and employment. In that vein, payment solutions for the informal economy are set to take a giant leap forward. “He estimates that the informal sector makes up 7% of the country’s GDP and there have been reports that this could go up to 20%,” reports the Mail & Guardian.
Payment Solutions Help SMME Growth
Informal, Kasi business people are ‘not averse to being part of these things,’ Alcock points out, ‘but they currently don’t receive any services, any support or anything for it.’ Huge Connect, for one sees just how much payment solutions for these resilient traders of the informal economy ensures their growth and prosperity.
Deloitte reports that significant value can be unlocked for small businesses by “making or receiving payments strategically in a manner that attracts rewards, improves working capital, drives efficiency or optimises processes.”
“The spaza sector is “disrupting” the formal sector and is worth R250-billion, with local stores offering goods at between 5% to 10% cheaper than low-cost grocery giant Shoprite”, says Alcock. He points out the huge traditional healing industry is worth R3 -billion, which is 6% of the entire national budget. Once again, this informal economy alone could do with payment systems rather than cash and its attendant dangers.
Alcock speaks out on another key issue holding the informal economy back, namely the lack of access to finance. “In Kenya,” he says, “the informal sector is increasingly making use of mobile applications to record transactions, in order to access finance and banking, which is a possible solution for South Africa’s informal economy.”
“Even the social grant system is designed to grow the formal economy,” says Alcock. We, at Huge couldn’t agree more. The staggering robberies experience by the thousands upon thousands who get their government grants in cash from the likes of Boxer and Shoprite stores could be stopped if mobile payment solutions were available for their spend.
Deloitte notes that “digital payments can deliver a significant uplift to… profitability and growth by delivering:
- A better customer experience (e.g., accepting payments from any location via mobile phone)
- Cost reduction (e.g., reduced people cost versus paper-based transactions)
- Record retention (e.g., cloud-hosted transaction data)
- Deliver competitive advantage (e.g., ability to access overseas markets)”
Yes, we hear you thinking that the informal economy isn’t in line for international markets, let alone digital payment solutions. But may we point out that Nando’s began in the backstreets of downtown Johannesburg, a tiny outlet bought by two dudes who ‘like it hot’. It now operates in over 1,000 branches in 35 countries.
Just because we don’t know the potential reach of the informal economic sector doesn’t mean that it doesn’t exist. For the informal economy, payment solutions are more than just a beneficial financial gateway, it’s a way to bring them on board as substantial contributors to SA’s GDP.
Contact us on https://hugeconnect.co.za and we will assist entrepreneurs and SMMEs with payment solutions appropriate to your endeavour.
